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Netflix (NFLX) Q1 Earnings Beat, User Growth Misses Estimates
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Netflix (NFLX - Free Report) reported first-quarter 2022 earnings of $3.53 per share, beating the Zacks Consensus Estimate by 20.89% and the company’s guidance of $2.86 per share. However, the figure decreased 5.9% year over year.
Revenues of $7.87 billion increased 9.8% year over year but missed the consensus mark by 0.9%. Average revenue per membership increased 2% year over year on a reported basis and 6% on a foreign-exchange neutral basis.
The streaming giant lost 0.20 million paid subscribers globally against the addition of 3.98 million in the year-ago quarter, missing its guidance of 2.5 million paid-subscriber additions. Its Russia operation’s exit hurt Netflix as it lost 0.7 million subscribers in the reported quarter.
At the end of the first quarter, Netflix had 221.64 million paid subscribers globally, up 5% year over year, missing management’s expectation of 224.34 million.
The miss reflects growing competition from services launched by Apple (AAPL - Free Report) , Disney (DIS - Free Report) and Comcast (CMCSA - Free Report) , as well as the negative impact of Netflix accounts being shared. The company estimates that Netflix accounts are being shared with more than 100 million additional households (apart from its almost 222 million user base), including over 30 million in the United States and Canada (UCAN) region.
Netflix now expects to lose two million paid subscribers in second-quarter 2022 compared with the year-ago quarter’s addition of 1.54 million, reflecting stiff competition, unfavorable impact of account sharing, sluggish economic growth, increasing inflation, the Russia-Ukraine conflict and some continued disruptions from COVID-19.
Netflix expects to end the second quarter of 2022 with 219.64 million paid subscribers globally, indicating growth of 5% from the year-ago quarter.
In the past year, Netflix shares have underperformed Apple, Disney and Comcast. While Netflix shares fell 42.2%, Apple, Disney and Comcast declined 5.8%, 14.9% and 4.5%, respectively.
Segmental Revenue Details
UCAN reported revenues of $3.35 billion, which rose 5.6% year over year and accounted for 42.6% of total revenues. ARPU grew 5% from the year-ago quarter on a foreign-exchange neutral basis.
Paid-subscriber base increased 0.3% from the year-ago quarter to 74.58 million. The company lost 0.64 million paid subscribers against the year-ago quarter’s gain of 0.45 million.
Europe, Middle East & Africa (EMEA) reported revenues of $2.56 billion, which climbed 9.3% year over year and accounted for 32.6% of total revenues. ARPU grew 6% from the year-ago quarter on a foreign-exchange neutral basis.
Paid-subscriber base increased 7.6% from the year-ago quarter to 73.73 million. The company lost 0.3 million paid subscribers against the year-ago quarter's net addition of 1.81 million.
Latin America’s (LATAM) revenues of $999 million increased 19.4% year over year, contributing 12.7% of total revenues. ARPU grew 20% from the year-ago quarter on a foreign-exchange neutral basis.
Paid-subscriber base rose 4.5% from the year-ago quarter to 39.61 million. The company lost 0.35 million paid subscribers against the year-ago quarter’s net addition of 0.36 million.
Asia Pacific’s (APAC) revenues of $917 million soared 20.3% year over year and accounted for 11.7% of total revenues. ARPU increased 1% year over year on a foreign-exchange neutral basis.
Paid-subscriber base jumped 25.6% from the year-ago quarter to 33.72 million. The company added 1.09 million paid subscribers in the quarter, down 19.9% year over year.
Operating Details
Marketing expenses increased 8.5% year over year to $556 million. As a percentage of revenues, marketing expenses decreased 10 basis points (bps) to 7.1%.
Operating income increased 0.6% year over year to $1.97 billion. Operating margin contracted 230 bps on a year-over-year basis to 25.1%.
Balance Sheet & Free Cash Flow
Netflix had $6 billion of cash and cash equivalents as of Mar 31, 2022, compared with $6.03 billion as of Dec 31, 2021.
Long-term debt was $14.5 billion as of Mar 31, 2022, compared with $14.7 billion as of Dec 31, 2021.
Streaming content obligations were $22.37 billion as of Mar 31, 2022, compared with $23.16 billion as of Dec 31, 2021.
Netflix reported free cash flow of $801.7 million compared with free cash flow outflow of $569.3 million in the previous quarter.
Guidance
For the second quarter of 2022, Netflix forecasts earnings of $3 per share, indicating 20% decline from the figure reported in the year-ago quarter.
The Zacks Consensus Estimate for the same is pegged at $2.97 per share, currently lower than the company’s expectation, unchanged from the figure reported in the year-ago quarter.
Total revenues are anticipated to be $8.053 billion, suggesting growth of 9.7% year over year. The consensus mark for revenues stands at $8.21 billion, higher than the company’s expectation and indicating 11.85% growth from the figure reported in the year-ago quarter.
Operating margin is projected at 21.5% compared with 27.4% reported in the year-ago quarter.
For 2022, Netflix expects operating margin around 20% compared with 21% reported in 2021.
Image: Bigstock
Netflix (NFLX) Q1 Earnings Beat, User Growth Misses Estimates
Netflix (NFLX - Free Report) reported first-quarter 2022 earnings of $3.53 per share, beating the Zacks Consensus Estimate by 20.89% and the company’s guidance of $2.86 per share. However, the figure decreased 5.9% year over year.
Revenues of $7.87 billion increased 9.8% year over year but missed the consensus mark by 0.9%. Average revenue per membership increased 2% year over year on a reported basis and 6% on a foreign-exchange neutral basis.
The streaming giant lost 0.20 million paid subscribers globally against the addition of 3.98 million in the year-ago quarter, missing its guidance of 2.5 million paid-subscriber additions. Its Russia operation’s exit hurt Netflix as it lost 0.7 million subscribers in the reported quarter.
At the end of the first quarter, Netflix had 221.64 million paid subscribers globally, up 5% year over year, missing management’s expectation of 224.34 million.
The miss reflects growing competition from services launched by Apple (AAPL - Free Report) , Disney (DIS - Free Report) and Comcast (CMCSA - Free Report) , as well as the negative impact of Netflix accounts being shared. The company estimates that Netflix accounts are being shared with more than 100 million additional households (apart from its almost 222 million user base), including over 30 million in the United States and Canada (UCAN) region.
Netflix, Inc. Price, Consensus and EPS Surprise
Netflix, Inc. price-consensus-eps-surprise-chart | Netflix, Inc. Quote
Netflix now expects to lose two million paid subscribers in second-quarter 2022 compared with the year-ago quarter’s addition of 1.54 million, reflecting stiff competition, unfavorable impact of account sharing, sluggish economic growth, increasing inflation, the Russia-Ukraine conflict and some continued disruptions from COVID-19.
Netflix expects to end the second quarter of 2022 with 219.64 million paid subscribers globally, indicating growth of 5% from the year-ago quarter.
Shares of this Zacks Rank #3 (Hold) company were down almost 25% in after-hours trading following the announcement of the results. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
In the past year, Netflix shares have underperformed Apple, Disney and Comcast. While Netflix shares fell 42.2%, Apple, Disney and Comcast declined 5.8%, 14.9% and 4.5%, respectively.
Segmental Revenue Details
UCAN reported revenues of $3.35 billion, which rose 5.6% year over year and accounted for 42.6% of total revenues. ARPU grew 5% from the year-ago quarter on a foreign-exchange neutral basis.
Paid-subscriber base increased 0.3% from the year-ago quarter to 74.58 million. The company lost 0.64 million paid subscribers against the year-ago quarter’s gain of 0.45 million.
Europe, Middle East & Africa (EMEA) reported revenues of $2.56 billion, which climbed 9.3% year over year and accounted for 32.6% of total revenues. ARPU grew 6% from the year-ago quarter on a foreign-exchange neutral basis.
Paid-subscriber base increased 7.6% from the year-ago quarter to 73.73 million. The company lost 0.3 million paid subscribers against the year-ago quarter's net addition of 1.81 million.
Latin America’s (LATAM) revenues of $999 million increased 19.4% year over year, contributing 12.7% of total revenues. ARPU grew 20% from the year-ago quarter on a foreign-exchange neutral basis.
Paid-subscriber base rose 4.5% from the year-ago quarter to 39.61 million. The company lost 0.35 million paid subscribers against the year-ago quarter’s net addition of 0.36 million.
Asia Pacific’s (APAC) revenues of $917 million soared 20.3% year over year and accounted for 11.7% of total revenues. ARPU increased 1% year over year on a foreign-exchange neutral basis.
Paid-subscriber base jumped 25.6% from the year-ago quarter to 33.72 million. The company added 1.09 million paid subscribers in the quarter, down 19.9% year over year.
Operating Details
Marketing expenses increased 8.5% year over year to $556 million. As a percentage of revenues, marketing expenses decreased 10 basis points (bps) to 7.1%.
Operating income increased 0.6% year over year to $1.97 billion. Operating margin contracted 230 bps on a year-over-year basis to 25.1%.
Balance Sheet & Free Cash Flow
Netflix had $6 billion of cash and cash equivalents as of Mar 31, 2022, compared with $6.03 billion as of Dec 31, 2021.
Long-term debt was $14.5 billion as of Mar 31, 2022, compared with $14.7 billion as of Dec 31, 2021.
Streaming content obligations were $22.37 billion as of Mar 31, 2022, compared with $23.16 billion as of Dec 31, 2021.
Netflix reported free cash flow of $801.7 million compared with free cash flow outflow of $569.3 million in the previous quarter.
Guidance
For the second quarter of 2022, Netflix forecasts earnings of $3 per share, indicating 20% decline from the figure reported in the year-ago quarter.
The Zacks Consensus Estimate for the same is pegged at $2.97 per share, currently lower than the company’s expectation, unchanged from the figure reported in the year-ago quarter.
Total revenues are anticipated to be $8.053 billion, suggesting growth of 9.7% year over year. The consensus mark for revenues stands at $8.21 billion, higher than the company’s expectation and indicating 11.85% growth from the figure reported in the year-ago quarter.
Operating margin is projected at 21.5% compared with 27.4% reported in the year-ago quarter.
For 2022, Netflix expects operating margin around 20% compared with 21% reported in 2021.